Protester Pierre Batellier stands in front of the field a company has selected to search for natural gas deposits, in St-Marc sur Richelieu, Que., in Sept. 30, 2010. (Christinne Muschi For The Globe and Mail)

Protester Pierre Batellier stands in front of the field a company has selected to search for natural gas deposits, in St-Marc sur Richelieu, Que., in Sept. 30, 2010.(Christinne Muschi For The Globe and Mail)

A U.S.-incorporated energy firm, Lone Pine Resources Inc., is taking on Quebec’s stand against fracking, saying it violates the North American free-trade agreement and demanding more than $250-million in compensation.

Lone Pine Resources Inc., headquartered in Calgary but incorporated in Delaware, disclosed in a filing with the U.S. Securities and Exchange Commission this week that on Nov. 8, it filed a notice of intent to sue the Canadian government under NAFTA’s controversial Chapter 11.

Protest

Energy

infographic

Those provisions of the trade treaty allow U.S. and Mexican companies to sue Ottawa if they feel they have been wronged by a government policy or action.

Lone Pine is just one of many major natural gas companies affected by Quebec’s moratorium on hydraulic fracturing, or fracking, which involves injecting liquids deep into the ground. Fracking has been controversial over fears for its effects on the environment and drinking water, and has been banned in several European countries. The industry says that done properly, it is safe.

According to Lone Pine, Quebec passed legislation last June that, in addition to the moratorium, also completely cancelled permits for oil and gas activity in areas directly below the waters of the St. Lawrence River – including the revoking of a permit held by Lone Pine covering 33,460 acres.”

Company spokesman Shane Abel said in an interview that Quebec’s legislation denies the company any compensation for the loss of its permit.

“We think that the expropriation is arbitrary and without merit,” he said. “… We think that’s a clear violation of the NAFTA agreement.”

The NAFTA challenge, levelled at a major environmental policy, is fuel for critics of trade deals who are now attacking Canada’s proposed investor-protection agreement with China, which would extend similar rights to Chinese investors in Canada.

“It contradicts everything the government has said about the China investment treaty, about it having no impact on the environment and there being no threats to non-discriminatory environmental measures,” said Stuart Trew, trade campaigner with the Council of Canadians.

But some trade experts call such talk alarmist. Lawrence Herman, a former diplomat and now a trade lawyer with Cassels Brock & Blackwell LLP in Toronto, says many NAFTA cases go nowhere. He argues the treaty – and others like it – do not restrict the ability of governments to bring in environmental or other legislation.

Winning a NAFTA case against Quebec’s fracking policy would be “an uphill battle,” he said, since the policy has a legitimate purpose, and does not appear to discriminate against foreign firms.

Lone Pine, which also has natural gas and oil assets elsewhere in Quebec and in the rest of Canada, was created in 2011, spun off from Denver-based Forest Oil Corp. Hit by the fracking moratorium and other problems, it has since run into financial trouble, sending its stock price tumbling. It recently sold off some of its Alberta assets.

Quebec’s fracking moratorium, put in place by the previous Liberal government, is meant to stay in place at least until the province completes an environmental review of fracking, expected in 2014.

Denis Hardy, chief of staff for Quebec’s Minister of Natural Resources, Martine Ouellet, said government lawyers were looking over the company’s complaint. But he said NAFTA challenges were an affair for the federal government.

Caitlin Workman, a spokeswoman for the Department of Foreign Affairs and International Trade, said the federal government was still assessing the information filed by the company and consulting with the Quebec government.

Restrictions

All rights reserved. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is prohibited without the prior written consent of Thomson Reuters. Thomson Reuters is not liable for any errors or delays in Thomson Reuters content, or for any actions taken in reliance on such content. ‘Thomson Reuters’ and the Thomson Reuters logo are trademarks of Thomson Reuters and its affiliated companies.